Business Ethics

and Governance
ZCMA6072
(or BRINGING CONSCIENCE BACK TO BUSINESS)
FACILITATOR:
Ahmad Zakie Ahmad Sharif
(zakiesharif@yahoo.com)
 Some Ground Rules:

Respect for Others

Discharge Your Responsibilities
Play Nice
 How Will You Be Graded
Class attendance and participation
10%
Individual projects (2x) 20%100
Group project 30% %
Final Examination 40%
Students are expected achieve M-level performance in the assessments,
drawing upon evidence-based argument, critical thinking, and broad
understanding of the subject matter, not only within their organization and
sector but also across a reasonable spectrum of other organizations and
sectors
 WELCOME
Capstone Module goes beyond thinking process and
technical courses.
Its your Conscience :
 Our Agenda:
Why study Business Ethics and Governance?
The Underpinnings of Business Ethics and Governance
Developing Your Own Ethical Values
Your Own CREDO
Tackling Ethical Dilemmas
Wrapping it up
 Business Ethics and
Governance, Really?
2008, global financial meltdown, specifically in the US
sub-prime crisis.
The world lost USD50 trillion in financial
assets, an amount roughly equal to the annual total of the
worldwide Gross Domestic Product. The worst economic crisis in
80 years!
People working in long-standing, successful companies found
themselves at the end of their careers, with no job, no pension,
and no faith in business!
The statistics are overwhelming and the numbers are
unimaginable, but the human toll of the crisis is real!
 The Malaysian Experience

Corporate fraud in the early 2000s

Transmile Berhad, The PPRT scandal,
Gunawan Steel Mill, Petroleum Hub in Yan,
Kedah.
Cheating in the socio-economic sphere, the
sports world
Some Disturbing Realities
 More Disturbing Realities

MARA Australian Property Scandal

 Reality Check:
Sime Darby Berhad
Vision
To be a leading multinational corporation delivering sustainable value
to all stakeholders
Mission
We are committed to developing a winning portfolio of sustainable
businesses
We subscribe to good corporate governance and high ethical values
We continuously strive to deliver superior financial returns through
operational excellence and high performance standards
We provide an environment for our people to realise their full
potential
 Sime Darby (contd)
Core Values
Integrity
Uphold high levels of personal and professional values in all our business interactions
and decisions
Respect & Responsibility
Respect for the individuals we interact with and the environment that we operate in
(internally and externally) and committing to being responsible in all our actions
Excellence
Stretch the horizons of growth for ourselves and our business through our unwavering
ambition to achieve outstanding personal and business results
Enterprise
Seek and seize opportunities with speed and agility, challenging set boundaries
 Vision
A strategic enabler for new ideas and sources of
growth

Mission
To drive sustainable economic development by
forging strategic global partnerships and promoting
FDI
 Majlis Amanah Rakyat (MARA), sebuah agensi
Kementerian Kemajuan Luar Bandar Dan Wilayah,
ditubuhkan pada 1 Mac 1966 di bawah Akta Parlimen
sebagai sebuah badan berkanun hasil daripada resolusi
Kongres Ekonomi Bumiputera pertama pada tahun
sebelumnya.
Adalah menjadi kewajipan Majlis bagi memajukan,
menggalakkan, memudahkan serta menjalankan
pembangunan ekonomi dan kemasyarakatan dalam
persekutuan dan khususnya dalam kawasan-kawasan luar
bandar.
 Majlis Amanah Rakyat
Sebuah nama keramat Lahir dari percikan amarah suatu bangsa Yang
mundur sosio-ekonominya Masih menadah tangan menjadi peminta Di
tanah airnya yang hampir sepuluh tahun merdeka. Bermula di zaman
penjajah dikenal dengan RIDA - Lembaga Kemajuan Kampung Dan
Perusahaan Suatu bayangan tipis cara Inggeris melonggarkan Kritik tajam
rakyat terhadap dasar penjajahan.
RIDA yang berdetik pada tahun 1953 Ketika bara nasionalisma marak
menyala Tidak mampu menampung ghairah rakyat merdeka Suara
Bumiputera yang semakin keras bergema Kemunduran dan kemiskinan
yang ketara. Tahun seribu sembilan ratus enam puluh lima Kongres
Ekonomi Bumiputera Yang Pertama Merumuskan segala duka nestapa
bangsa Bahawa kita memiliki telaga Mengapa masih memegang talinya
Sedang orang mencapai timba Maka segala gaung amarah dileburkan
Menjadi sumpah amanah suatu wawasan
Pada detik 1966 yang menentukan RIDA pun dikerandakan dalam sejarah
Untuk sebuah nama baru yang keramat Majlis Amanah Rakyat Kini 25
tahun telah berdetik MARA mencapai kedewasaan usia Mungkinkah
bakal tiba Kongres Ekonomi Bumiputera Penyelarasan jalur wawasan dua
ribuan Menilai kembali keberkesanan AMARAH dan Amanah Rakyat
 The MBA Conundrum then:
The MBA is viewed as an opportunity to improve ones career. Yet, in
the aftermath of the 2008 crisis, 25% of the HBS graduates of 2008/9
were without jobs!
Unbelievable! - that you can graduate from one of the most
prestigious business schools and still be unemployed!
The Masters of Business Administration, that swollen class of
jargon-spewing, value-destroying financiers and consultants, have
done more than any other group of people to create the economic
misery we find ourselves in.
- Sunday Times (London) March 1, 2009
 Why the Perception:
I have come to believe that much of what my colleagues and I
taught has caused real suffering, suppressed wealth creation,
destabilized the world economy, and accelerated the demise of
20th century capitalism in which the US played a leading role.
Prof Shoshana Zuboff, HBS, Charles Edward Wilson Chair

We werent stupid and we werent evil. Nevertheless we managed

to produce a generation of managers and business
professionals that is deeply mistrusted and despised by a
majority of people in our society and around the world. -
Prof Shoshana Zuboff, HBS Businessweek , July 2, 2009
 Core Values:
Core values can include a belief in God,
a belief that family is fundamentally
important and a belief in honesty. Core
values are the fundamental beliefs of a
person and are subject to change slightly
as a person gets older.

Even companies have core values. They

can include a commitment to helping the Terra
Industries
environment and a commitment to
excellence.

Core values can be positive or negative.

Positive core values include
dependability, loyalty, creativity and
respectfulness. Negative core values
include greed and self-interest.
What are YOUR Core Values?

1. AS AN INDIVIDUAL

2. AS A GROUP
 WHY DO WE JOIN AN MBA
PROGRAM?
Premised on the belief that we can better manage
ourselves, our finances, and our firms in ways that create
value without adding unnecessary risk to the system.
We can earn healthy profits without losing the trust of
those who work with us or compete against us.
We can work with the understanding that we are stewards
of a great trust that must be protected.
 What is Ethics?
Ethics is that part of philosophy which is concerned with living
well, being a good person, doing the right thing, getting along
with other people and wanting the right things in life. Ethics is
essential to living in society, any society, with its various traditions,
practices and institutions.
Those traditions, practices and institutions can and must themselves
be assessed according to ethical standards, but they themselves
determine many of the rules and expectations that define the ethical
outlook of the people living within them. Ethics therefore has both a
social and a personal dimension.
 Understanding Personal Ethics
Part of our ethics is understanding ethics, that is, acting for reasons and
being able to defend our actions if called upon to do so. It is not enough,
after the age of eight or so, simply to do what you are told; it is just as
important to know the reason why, and to be able to say no when you think
an act is wrong.
Ethics is not just a varied collection of dos and donts but a system of
values and principles which tie together in a reasonable and coherent way
in order to make our society and our lives as civilized and as happy as
possible. The study of ethics is the final step in this process of education
the understanding of that system as such and the way that all our
particular values and principles fit into it
 What is Morality?
Morality is something more specific, a subset of ethical rules which are of
particular importance and transcend the boundaries of any particular ethos or
situation. Thus, we believe, it is always immoral to be cruel to children, even if
doing so is part of a family tradition for several generations.
Morality, accordingly, is thought to be a weightier term than ethics. If
someone refuses to play fair or to honor a verbal contract, we might say that
he or she is untrustworthy or unethical, but we would not say immoral. If
a person abuses children or poisons his in-laws, however, we would call such
behavior immoral, thus indicating the seriousness of these violations.
Morality consists of the most basic and inviolable rules of a society.
 Business Ethics
(1) On the macro-level, business ethics examines the state, the
economic system and society as a whole. This is referred to in the
literature as business ethics in the strict sense of the word.
(2) On the meso-level, business ethics is dealing with moral
problems of companies, corporations, organisations and their actions.
For this the term corporate ethics has become established.
(3) On the micro-level, business ethics attempts to answer questions
on how individuals can act in a morally sound way within the
business field.
 How DO You Resolve Ethical
Dilemmas?
The Divine Command Theory follow the tenets of your faith
The Ethical Egoism Theory - act in self interest but with legal guidelines
The Utilitarian Theory balancing: minimize the harm and maximize the
benefit
The Categorical Imperative do not use others to maximize your benefits
The Contractarian Theory tabula rasa starting from scratch to develop
universal values
Moral Relativists time and place ethics. Arson is not a crime if it drives
drug pushers away from your community.
 Hank Greenberg and AIG
Hank Greenberg was the formidable CEO of AIG, the largest
insurer in the United
States. Mr. Greenberg was removed from his position when the
SEC raised issues regarding
the companys accounting practices and the accuracy of its
financial statements. AIG
eventually released financial statements that reduced its profits
by $4.4 billion. Mr.
Greenberg maintained then and maintains now that he did
nothing wrong.

A story from his youth ofers some insight into his ethical
philosophy. When he was
stationed in London during World War II, the United States and
its military command
The only requirement for the extra leave day was that the
soldiers had to bring back a playbill or program from
whatever cultural event they had attended. Mr. Greenberg
would buy a ticket to the theater, go in, collect the playbill,
and then head out the side exit to spend the time on other
activities, the types of activities the commanders were
trying to have the soldiers avoid, to wit, carousing.
Mr. Greenberg had his proof of cultural activities, but he
also had his usual fun.
 The Question:
Did Mr. Greenberg violate any rules as a soldier?
Isnt the lack of clarity on the part of the commanding
oficers what caused the problem?
Whats wrong with using a loophole in the system?
Do you believe that a pattern established in youth
surfaced as he was running AIG?
 Resolving Ethical Issues
Primum Non Nocere: Above all, Do No Harm Peter
Drucker
Is it legal? Is it balanced? How does it make me feel? -
Blanchard & Peale
The Newspaper Headline Test Warren Bufett
 Business Ethics
Business ethics means a great deal more than obeying the
civil law and not violating the moral law. It means imagining
and creating a new sort of world based on the principles of
individual creativity, community, realism, and other
virtues of enterprise.
It means respecting the right of the poor to their own
personal economic initiative and their own creativity. It means
fashioning a culture worthy of free women and free mento
the benefit of the poor and to the greater glory of God.
 Do you Agree?
As businessmen, we are told that we should not cheat,
steal, lie, bribe, or take bribes. But nor should anyone
else. Men and women do not acquire exemption from
ordinary rules of personal behavior because of their work
or job.
They do not cease to be human beings when appointed
vice-president, city manager, or college dean. There has
always been a number of people who cheat, steal, lie,
bribe, or take bribes. The problem is one of moral values
and moral education, of the individual, of the family, of the
school. But there neither is a separate ethics of business,
nor is one needed
How Do You Stand on Values That
Underpin Business Ethics?
Do your values stand the test of moral scrutiny and assessment?
Peter Drucker: in times of adversity, in times that try a
mans soul, values are a NECESSITY.
If right values are absent fro a company in such times, there is
no incentive for human beings to walk the extra mile, to make
the extra commitment, to do the hard work of rethinking a
strategy, of trying new things, of rebuilding. People wont do
that just for money.
They will do it if they believe what their business does and can
do matters. It is this belief that is instilled by the right values.
THE PURPOSE OF A MANAGER

As a manager, my purpose is to serve the

greater good by bringing together people and
resources to create value that no single
individual can build alone. Therefore, I will seek
a course that enhances the value my enterprise
can create for society over the long-term.
 ETHICS AND INTEGRITY

I will act with utmost integrity and pursue

my work in an ethical manner. My personal
behavior will be an example of integrity,
consistent with the values I publicly espouse.
 NO MAN IS AN ISLAND

I will safeguard the interest of my

shareholders, co-workers, customers, and the
society in which we operate.
I will endeavor to protect the interests of those
who may not have the power but whose well-
being is contingent on my decisions.
 AMBITION AND GOOD FAITH

I will manage my enterprise in good faith,

guarding against decisions and behavior that
advance my own narrow ambitions but harm
the enterprise and the people it serves.
THE LETTER AND SPIRIT OF THE
LAW
I will understand and uphold, both in letter and
in spirit, the laws and contracts governing my
own conduct and that of my enterprise. If I find
laws that are unjust, antiquated, or unhelpful I
will not brazenly break, ignore or avoid them. I
will seek civil and acceptable means of
reforming them.
 RESPONSIBILITY AND
TRANSPARENCY
I will take responsibility for my actions, and I
will represent the performance and risks of
my enterprise accurately and honestly.
PERSONAL AND PROFESSIONAL
GROWTH
I will develop both myself and other
managers under my supervision so that the
profession continues to grow and contribute
to the well-being of society.
 SUSTAINING PROSPERITY AND
LIVING WELL
I will strive to create sustainable economic,
social, and environmental prosperity
worldwide. Sustainable prosperity is created
whe the enterprise produces an output in the
long-run that is greater than the opportunity
cost of all the input it consumes.
 ACCOUNTABILITY
I will be accountable to my peers and they will be
accountable to me by living this oath. I recognize that
my stature and privileges as a professional stem from
the respect and trust that the profession as a whole
enjoys, and I accept my responsibility for embodying,
protecting and developing the standards of the
management profession, so as to enhance that trust
and respect.
 EPILOGUE

We must decide what our era stands for. Lets

bring the basic principle of life responsibility,
accountability, fairness, and honesty to
everything we, management professionals, do.
Lets put business to good use and use
business to bring about good in the world.
 LAST WORDS
.
What kind of business leaders will we be?
Let us be leaders with dignity, who refuse to
collude in our own defeat, who refuse to put our job
security above our honor, who prize our character
even more highly than our cash flow statements.
Let us be the ones who are defined not by
extracting value but by creating it; people who are
known for their integrity, their ethics, and their
visionary leadership.